How much can I afford to borrow? Understanding your borrowing capacity
How much can you afford to borrow? Learn how your budget, commitments, interest and the credit assessment affect your borrowing capacity.
Updated on · Budgetcredit
Your borrowing capacity is the loan amount that your financial situation is expected to support. Your net salary is not the only factor. What matters is the amount reliably available after living expenses, taxes and existing commitments, and whether it also satisfies the required affordability assessment.
A calculator can provide initial guidance. It does not produce a binding loan approval. Your information and documents must be checked and the lender’s criteria met first.
Distinguish the amount requested, monthly instalment and borrowing capacity
The requested amount describes your plan: for example, you need CHF 30'000. The monthly instalment describes the payment during the agreed term. Borrowing capacity answers a different question: what loan amount can your budget support at all?
These three figures must not be confused. A long term can make an instalment look small even though the amount fails the statutory affordability assessment. Conversely, you do not need to borrow the calculated maximum if your actual need is lower.
If you initially only want to compare the cost of a particular amount, read A longer or shorter loan term.
Step 1: start with reliable income
Write down your regular net salary. What matters is which deductions it already includes. With withholding tax, the salary paid into your account may already be reduced by tax. Your personal budget must not accidentally deduct that tax in full again.
Show additional income separately. This makes clear what is available regularly and what is only occasional. A one-off bonus differs from a contractually guaranteed 13th salary payment. Whether, and to what extent, a provider counts these items forms part of its assessment.
For a shared household, actual incomes and shares of costs matter. Another person’s entire income is not automatically available for your loan. A shared household overview must not be equated with joint legal liability.
Step 2: record monthly costs completely
A useful overview includes housing, health insurance, taxes, living expenses and existing commitments. For personal planning, annual expenses are converted into a monthly amount. A bill of CHF 1'200 a year effectively costs your budget CHF 100 a month, even if it is paid only once.
Families must include children’s premiums and other family costs. Premium subsidies must be counted only once. Taxes whose amount is still unknown do not become zero: the uncertainty must be clarified or accounted for with a justified estimate.
The statutory affordability assessment uses the guidelines of the canton of residence for protected expenses. Article 28 KKG also expressly lists the rent actually owed, taxes owed according to the withholding tax table and reported commitments. A general household budget and this statutory calculation are therefore not identical. KKG, Art. 28
An example of a personal budget overview
The following calculation illustrates a freely chosen everyday situation. It is neither a cantonal subsistence minimum nor a bank’s affordability assessment.
| Monthly item | Example amount |
|---|---|
| Net salary before taxes budgeted separately | CHF 6'000 |
| Housing including budgeted ancillary costs | − CHF 1'650 |
| Health insurance | − CHF 420 |
| Tax reserve | − CHF 650 |
| Living expenses and other regular expenditure | − CHF 1'700 |
| Existing commitments | − CHF 300 |
| Reserves for irregular expenses | − CHF 480 |
| Calculated remainder | CHF 800 |
The CHF 800 is initially a personal budget remainder. It is not yet a monthly assessment surplus confirmed by a bank. For the legal calculation, the items must be checked under the applicable rules. In your own planning, also consider how much of this remainder you can responsibly commit to instalments over time.
Step 3: turn a monthly amount into a loan amount
A loan amount is not simply the free monthly amount multiplied by your preferred term. Repayments must also cover interest. For a cash loan covered by the KKG, the assessment generally assumes amortisation over 36 months, even if the contract term is longer. KKG, Art. 28 para. 4
A purely mathematical example: if CHF 800 a month could be used entirely for equal repayments over 36 months, an effective annual interest rate of 9.95 % would mathematically support principal of approximately CHF 24'966. Multiplying CHF 800 × 36 would instead give CHF 28'800, ignoring interest.
This model calculation is neither a bank assessment nor approval. A cautious indication shown by a budget calculator may differ. In particular, you must not infer from this example that a personal budget remainder of CHF 800 automatically leads to a loan of CHF 24'966.
Why a longer term does not always solve the problem
For CHF 30'000 at an illustrative effective annual interest rate of 6.9 %, the monthly instalment over 60 months is approximately CHF 590. The comparable payment for repayment over 36 months is approximately CHF 922. Looking only at CHF 590 can underestimate the affordability assessment requirements.
The two figures serve different purposes: the contractual instalment describes the ongoing payment. The assessment period provides statutory protection against over-indebtedness. More background is available in Why is affordability assessed over 36 months?.
What if your requested amount is higher?
First check the information: was an expense entered twice? Is documented income missing? Has an old commitment already ended? Correct actual errors without interpreting uncertain amounts optimistically.
Then reconsider the need, timing or scale of your plan. An individual assessment can examine the full circumstances. However, it does not bypass the affordability assessment. A lower indicated capacity should be explained; your original requested amount remains relevant to the conversation.
If the budget is already negative without a new instalment, another loan will not provide a lasting solution for ongoing expenses. First establish how income and commitments can be brought back into balance.
Frequently asked questions
Why do two people with the same salary get different results?
Because housing costs, children, taxes, existing commitments and other personal circumstances differ. The lender’s assessment also matters.
Is the borrowing capacity shown a binding offer?
No. It is an indication based on the information entered and the calculation assumptions. A binding offer only follows the assessment.
Can additional insurance help me finance an excessive amount?
Insurance does not replace sufficient affordability. Its premium is also an additional expense that your budget must accommodate.
Start with the amount you want
Have your requested amount, net salary and main monthly costs ready. Work with Budgetcredit to establish the right next step.
All examples are non-binding, exclude additional fees or insurance premiums and are rounded to whole francs. Credit must not be granted if it would lead to over-indebtedness.
